Credit scores to be revised amid soaring mortgage defaultsChanges in consumer behavior mean that borrowers who were once considered outstanding credit risks may no longer be so today.By Kenneth R. Harney

With foreclosures soaring — and homeowners with unblemished payment histories abruptly walking away from their houses with no warning to lenders — the two major producers of credit scores have begun changing how they evaluate consumers' risks of default. The revisions could affect you the next time you apply for a loan.

In late October, both Fair Isaac Corp., developer of the FICO score, which dominates the mortgage field, and VantageScore Solutions, a joint venture by the three national credit bureaus and marketer of the competing VantageScore, outlined modifications they were making to handle the vast credit disruptions caused by the housing bust, the recession, high unemployment and behavioral changes by consumers.

Overall, credit industry experts agree, consumer creditworthiness has deteriorated in the U.S. since 2006 — especially among what used to be considered the credit elite, people with the highest scores. For example, a study this year by VantageScore found that the probability of serious delinquency — defined as nonpayment for 90 days or more — had increased 417% among "super-prime" borrowers between June 2007 and June 2009. Default risk during the same period rose 406% for the second-highest-rated category of "prime" consumers, and nearly doubled for those at the "near prime" scoring level.

The driving force behind the score revisions, according to Sarah Davies, VantageScore's senior vice president for analytics and research, is the "significant change in consumer credit repayment behavior" that began during the housing bust and recession.

Not only are borrowers who previously were rated outstanding credit risks far more likely to default today, she said, but many homeowners are defying long-standing credit industry assumptions by going delinquent on their first mortgage payments while continuing to pay their credit card balances and second mortgages on time. Strategic defaults, or walkaways, by high-score borrowers also have been an unexpected development, she said.

To adjust its statistical models to these new realities, VantageScore says it conducted intensive research on 45 million active credit files obtained from the databases of its joint venture partners, Equifax, Experian and TransUnion. The research examined the same files — with personal identifiers removed — during set time periods between 2006 and 2009 to capture emerging behavioral patterns associated with defaults on various types of credit accounts. The resulting VantageScore 2.0, which is expected to be rolled out nationwide to lenders in January, focuses on the subtle warning signs of credit stress that might have been missed earlier and penalizes or rewards consumers with higher or lower risk scores than they would have received before.

Joanne Gaskin, director of mortgage scoring solutions for Fair Isaac, said her company's new FICO 8 Mortgage Score was based on similarly exhaustive research into consumer credit behavior changes over the last four years. When used by a lender to rate the risk of new applicants or existing mortgage customers, Gaskin says, the Mortgage Score is likely to be 15% to 25% more accurate in detecting signs of future default compared with the standard FICO model.

Though she would not discuss proprietary details about the early warning signs the new score monitors, Gaskin gave an example of how the new score might work: Say a borrower with a 720 FICO score has average balances on a first mortgage, home equity lines and other accounts that are higher than norms pinpointed by the revised scoring software. A 720 FICO is considered a good score by most mortgage lenders, often qualifying for favorable rates and terms. However, the same applicant might rate just a 680 FICO or lower if the lender used the new Mortgage Score. The lender would then have a choice: Reject the applicant, quote a higher interest rate on the mortgage or require a larger down payment.

Gaskin said the reverse could also occur: The FICO 8 Mortgage Score could come in higher than the standard FICO — indicating lower risk for the future — in situations where formerly troubled borrowers manage to put themselves back on a healthier credit track.

Experts in the credit industry say the new scoring efforts by Fair Isaac and VantageScore should prove to be a net positive for the housing and mortgage industries if they can do what they claim: spot subtle risk patterns and nascent hints of improvement.

But as a mortgage applicant you should know that your next score might not look anything like the score you thought you had. You might end up getting a better deal — or worse than you wanted — when lenders quote you rates and terms.

I love how everyone in this country is conditioned to care about their FICO score and how some company "rates" you in life, like they're some moral judge on your character. I used to be that way until you realize that having good credit is highly overrated. Many people will ruin their finances trying to "afford" a good credit score. Aside from gaining employment, all that having good credit does is allow you to go in debt. Pay for your stuff with cash, you'll be way better off.

If you choose to believe having a good credit score is “overrated” that is your prerogative, but your choice will not change the fact that the credit score you generate is based on your repayment history and use of the credit you already have. It also tells potential creditors something about you that they really want to know: how likely is it that this person will repay me in a timely manner?

As explained previously in this thread, the credit score does not just determine whether or not you will be extended credit (for a car, home, boat, cell phone, credit card, etc.), it also determines how much credit you will be extended and how much interest you will be charged for that credit; if you have a low score you will be charged more.

Similarly, employers now often screen job candidates via their credit score. People with low scores are often rejected in favor of people with higher scores. Finally, many other services that you never think about are tied to your credit score. Car insurance is just one example; if you have a good score your insurance rates are lower. Insurance companies don't talk about this, but it is true; it is true for a number of other vendors as well.

Computers have enabled the examination of conjunctive histories and all manner of number crunching; for better or worse the credit score is not going away. It will be used more and more—not less. You can acknowledge this reality and act accordingly or stick your head in the sand. The choice is yours. You and Thin Lizzy appear to be of the same mind. Perhaps you can start a club (for people in credit score denial).

I do understand and agree with some of your points on having good credit. My main point is that most people should be less concerned with whether or not they can borrow money from "potential creditors" and rather learn to pay for things on their own. A lot of people are far more worried about having a great credit score vs actually living within their means.

As far as a house/car/etc... You can buy a house without using credit whatsoever - it's not easy but their are programs out there. And for a car? Save up money and buy a car outright. You shouldn't have to spend 5-7 years paying off a depreciating asset. If you have to, then you aren't living within your means.

Given its potential to save or cost you money, people should indeed be “worried about having a great credit score.” Paying attention to your score and living within one’s means are not mutually exclusive.

As for buying a house without credit whatsoever . . . good luck with that.

Save for the ultra wealthy, I do not know anyone who has done that. Certainly, no one visiting a site like getbig is likely to do that so whom exactly are you trying to convince?

I'm not trying to convince anyone of anything, but it is definitely possible to buy a house without using credit. You sound like you're in the credit repair business or something along those lines. How about every time you see the word "credit", just replace it with "debt". All of your posts on here seem to emphasize the same idea: that people need to stress out and make sure their credit score is high enough so that they can go in debt.

Having good credit is similar to fat people taking high blood pressure medicine. All they're doing is going after the symptoms, rather than the problem - losing weight. If people actually saved their money and planned for expenses, they wouldn't need to borrow money, put "emergencies" on a credit card, finance a car, etc. Now I don't advocate that people not pay their bills and try to have a BAD credit score, but all the energy and focus that you/society puts on having a GOOD score would be better used to go towards learning how to budget and save and not rely on creditors and banks loaning you money.

When most of us do our holiday shopping, we're thinking about how to score that hot doorbuster deal on Black Friday, or we're trying to remember which size the kids are these days. What we're probably not thinking about is our credit score.

But your credit score is one of the most important components of your financial life, and it pays -- literally -- to guard it carefully, since the rates you pay on credit cards, car loans and even your mortgage are determined by that number. As a consumer, there are certain things you can do and choices you can make during the holiday shopping season that can keep your credit score from taking a beating.

"It's a very emotional time for a lot of people," points out Laura Creamer, financial education specialist at credit counseling group CredAbility in Atlanta. "They forget healthy [credit] habits from before," she says. But the financial choices you make when the malls are bedecked with festive accents and twinkling lights can have an impact on your credit score long after you've hauled that dried-out Christmas tree to the curb.

If you want to keep your credit score as healthy as possible this holiday season, take a look at these five ways you can do just that.

Know your limits

"Be sure you know what your credit limits are," advises Natalie Lohrenz, director of counseling at Consumer Credit Counseling Service of Orange County in Santa Ana, Calif. "A lot of people have had their credit limits lowered because the banks have all pulled back quite a bit." Unless you check your statements carefully, you might not have noticed that your credit limit's been lowered.

Keeping your limit in mind can help you keep your utilization low (more about that in the next section) and keep you from going over your credit limit, potentially incurring big charges as well as dragging down your credit score. You can get all your current credit information by ordering a copy of your credit report from the three major credit bureaus (Equifax, Experian and TransUnion), MyFICO.com or annualcreditreport.com (provided you haven't used this free service within the last year).

Don't max out your cards

A full 30% of your credit score is calculated based on your utilization ratio, which is basically how much of your available credit -- on each card individually, as well as in total -- has been spent at any given time. Having high utilization, or cards that are either near their limits or already maxed out, takes a steep toll on your credit score.

While some experts say you can get away with a utilization ratio of 30%, Barry Paperno, consumer operations manager for MyFICO.com, says the actual number for an optimal credit score is far lower. "On average, 7% is the ratio for high FICO achievers," he says.

When you're debating which card to use for a holiday purchase, Paperno says your utilization ratio should be a factor, especially if you plan to pay the balance in full (which would free you from being as concerned about the APR). If you're going to drop $500 on your purchases, all other things being equal, you want to reach for the card with the $5,000 worth of available credit instead of the one with just $1,000 of available credit.

Watch out for those store cards

Thinking about giving in to that store cashier's request to open a store credit card? "Keep in mind that if you're saving 10% on the purchase but you're paying 30% interest over six months, you're not going to be saving any money," says Paperno.

It's advice that can be easy for many of us to forget in the rush to finish our shopping and rack up as many discounts as possible. In the case of store cards, those discounts can hurt you a few ways. First, they might tempt you to overspend, and higher - and low limits, which means it's easier to max out the card and skew your utilization ratio into a score-unfriendly zone. And even if you don't get it, just applying for a card can ding you by a few points, adds CredAbility's Creamer, and a new credit account will pull down your score for around six months. If you sign up for a store card to get that discount, ask yourself this: Will you be wearing that scarf or playing with that electronic gadget come June? That's how long opening that card will impact your score.

Do big-ticket shopping in one fell swoop

We're all familiar with the commercials that show a person presenting a loved one with the keys to a shiny new car topped with a bow. If a grand gesture like this is in your plans for the year, do all your rate shopping within a two-week period to avoid lowering your credit score, says Creamer. That's because your score takes a slight hit every time you request credit, which includes asking for a rate from a bank, credit union or car dealership. The formula is "smart" enough to figure out that if you have a slew of requests at the same time for the same size loan, you're probably rate shopping, and it combines them into a single inquiry. But if you scatter those rate requests over a lengthier period, they'll each count individually, which could lower your score and hurt your chances of getting the best rate on those new wheels.

Avoid the payment-skipping option

Maybe you think your credit card issuer is being generous when it offers to let you skip a payment over the holidays. In reality, says Lohrenz, this action could wind up costing both you and your credit score big. When issuers offer this deal to you, they're not really cutting you a break; they're just racking up even more in interest charges that you'll owe them down the line.

If you're already right at your credit limit, this seemingly "helpful" offer could put you over your limit, triggering both fees and a negative impact on your credit score because your utilization ratio for that card will be upside-down. "Obviously, that's costing you money," Lohrenz says. Skipping payments might seem like a freebie, but it's not.

In many of my recent columns I've been writing a lot about credit reports and credit scores. Most of us don't need to be reminded of the importance of reviewing credit reports and fixing any errors, we know that keeping a clean and accurate credit report is important.

If you're one of the many Americans who already own your home and a car (or don't plan on buying either in the near future), you probably think that your credit score itself isn't that important. If you aren't getting a loan in the near future, why should you worry about your score? Unfortunately, your credit score is more important than you think and is being used by many institutions to help make decisions about you.

You "borrow" from a lot of institutions without explicitly borrowing money and those institutions often check your credit to decide if they want to do business with you. If you are currently renting where you live, your landlord almost certainly checked your credit history and used that to decide whether or not to rent to you.

If you have a good credit score, they probably asked for a smaller security deposit or reduced other fees. If you had a weaker score, or no score, they may have asked for more to offset the additional risk. If you're wondering what you borrowed from them, you borrowed the right to live in that home. The worst case for a landlord is to not be able to collect rent and be forced to go through the eviction process, which in some states can take many months. That's a risk they try to avoid and a credit report helps them do that.

If you're looking for a job, some employers are allowed to use your credit history to determine how safe of a candidate you are. While it's been shown that there's no relationship between a bad score and being untrustworthy, some employers, unless barred by law, are still using it to help them decide whether or not to hire a candidate. The last thing you want to do is have a missed payment cost you a job.

Those are just a few of the unexpected ways that a bad credit score can hurt you but fortunately you can do something about it. Be diligent about reviewing your credit reports and fixing any errors and inaccuracies. If you've been checking regularly and have seen no errors, keep up with it. Sometimes errors appear when you least expect them.

I've been reviewing my credit report for years and only just recently did I see a major problem (an unrelated account, which was behind on payments, appeared in my Experian report earlier this year), so stay on top of it. You can check your credit report for free at AnnualCreditReport.com.

If you're curious, there are ways for you to check your credit score for free if you're willing to sign up for some trials. I would avoid dealing with companies that aren't Fair Isaac Corporation (makers of the FICO score) or one of the three credit bureaus (Experian, Equifax, TransUnion). Fair Isaac's consumer facing company is MyFICO and you can often find plenty of MyFICO promotion codes.

New Twist: Your Credit Score Is a 'Ranking,' Not a 'Rating'by Diane Tuman

If you're a responsible consumer and pay your bills on time, you don't run up exorbitant credit card debt, and you have a healthy credit mix, you probably assume your fabulous credit score of say, 760, is solid and safe. That is, until you go to apply for a home loan, or car loan and see that your credit score is actually more like 720 now. Or, maybe your credit score hasn't changed, but you are now denied a loan that you were able to get a year ago with that same, fabulous score.

So, what happened?

Yuliya Demyanyk, a senior research economist with the Federal Reserve Bank of Cleveland, provides this fascinating finding about credit scores:

Your credit score is not a rating of your credit worthiness, but rather a ranking of your credit worthiness compared to the rest of the U.S. population at a specific point in time.

In other words, when your credit score changes — even if your credit behavior doesn't change — it's because your rank order compared to the rest of the population has shifted. For example, if the rest of your fellow Americans are paying more of their bills faster than you, this will affect your rank and your score. Conversely, if your fellow Americans slip in their payments, your credit score and rank will rise. So, even if you do everything right, you are thrown into the mix with the rest of the population and your score/ranking is affected by what everyone else is doing.

Hidden Data Point — Credit Risk vs. Credit Worthiness

An additional component of your credit score is your credit worthiness. This is a data point that predicts the likeliness that you will pay your bills on time or fall behind in payments. You won't see this number since it's part of a credit-reporting bureau's secret, credit-scoring model, but this is important to lenders who make the assessment of whether to loan you the money. Like it or not, it is an indication of your level of risk to a lender: "What kind of track record does this person have in paying loans on time?"

Another thing to understand is that the relationship between credit score and credit risk is dynamic and changes over time. So the risk associated with a 700 score last year is not the same as the risk with a credit score of 700 this year. And it's risk that the lender fundamentally cares about, not the score.

Also, even though your credit score and credit worthiness might be stable, conditions beyond your control — market conditions, a bad recession — could affect everyone's credit worthiness, not just yours. This is certainly true today in our financial crisis that has affected major aspects of our economy — namely, jobs and housing. So, that fabulous credit score that got you loans in the past may have changed as the "bar" for a good score shifts upwards and out of reach as lenders pull in and loan less.

How Your Credit Score Is Calculated:

For the most part, credit scores are generated from one of three major credit bureaus – Equifax, Experian and TransUnion. Each of these bureaus collects credit information on you and then applies a statistical algorithm to calculate your credit score (the Fair Isaac Corporation was the first to create such a score which is why credit scores are still oftentimes referred to as FICO scores). Each of the bureau's scores will vary slightly because they each have their own proprietary methods to track customer credit behavior and use different methods for collecting data on you. Recently, the three bureaus have gotten together and created a common score call the VantageScore, which is common across the three bureaus.

Factors That Affect Your Credit Score:

35% — Payment history

Lenders look at your payment history on all your accounts; the length of your positive credit history and how long you have gone without a negative item; whether there are any severe unpaid debts like bankruptcies or foreclosures; and the number and severity of delinquencies in your credit history.

30% — Amounts Owed

Too many credit accounts and a high ratio of credit balances to credit limits can affect your score. Also affecting your score is the amount of debt on each account and the level of debt paid off on term accounts.

15% — Length of Credit History

Longer credit histories result in higher scores. Important factors incorporated into credit scores are: length of credit history, length of time specific accounts have been open, and the duration of time since each account was last used.

10% — New Credit

Credit scores track consumers who suddenly take on new debt and potentially overextend themselves, by checking to see when the last time a consumer opened an account and how many accounts were opened and by looking at the number of inquires on the consumer's credit reports.

10% — Types of Credit Used

The type of credit you have plays an important role in determining your credit score. A "healthy mix" of installment loans (mortgage payment, auto loan) and revolving credit from banks is considered better for your score.

What's a good credit score?

Scores may range from around 300 to 900 (VantageScore) with the average credit score in America being around 720. Here is an approximate range of how credit scores are judged:

Excellent credit = 720 and above

Good credit = 660 to 719

Fair credit = 620 to 659

Poor/bad credit = 619 and below

For anecdotal evidence of your good credit standing, if you notice you are receiving a lot of zero percent credit card or lines of credit offers, you are probably in pretty good shape.

In conclusion, having a high credit score is still very important in getting the best mortgage rate, and you should be guided by the factors that make up your credit score. But, since you are ranked against the rest of the population and financial conditions also impact credit worthiness, improving your credit score is not always within your control.

Millions of consumers have fallen out of favor with the credit scoring gods.

Some lost their jobs or were just overwhelmed by mounting debt. Others got caught up in the real estate bubble or had major medical bills. Whatever the reason, the rising number of foreclosures, short sales, late credit card payments and the ultimate credit sin — bankruptcies — have left black marks on credit reports most everywhere.

So what can these people do to repair their credit?

The simple answer is to focus on the information that is used to generate the all-powerful FICO score — the measure used most frequently by traditional lenders to determine creditworthiness. Its scale runs from 300 points to 850 points; the higher the score, the better your credit standing. “FICO is still the 500-pound gorilla,” said John Ulzheimer, president of consumer education at SmartCredit.com. “In 2011, the best way to get credit from the mainstream lenders is to have a good FICO score.”

Consumers can hope that the banks will eventually consider alternatives to the traditional FICO score, which was developed by Fair Isaac Corporation and has been in wide use for about two decades. After all, as banks regain their appetite for lending, they will be looking for ways to differentiate between borrowers with the same scores, some of whom are temporarily struggling and others who chronically have trouble with money.

For now, though, the FICO score reigns. The best antidote to a poor score is time. Still, there are a half dozen ways to speed the process, or, at the least, avoid even more credit trouble.

New FICO tool claims ability to ID borrowers who may walk away from mortgagesBy Kimberly Miller

Homeowners who strategically default on their mortgages hope to fly under the radar, living payment-free while their foreclosure wends its way through the courts — a years-long process in some cases.

But the nation's leading credit-scoring company says it has developed a better way to identify borrowers who can afford to pay their mortgage but choose foreclosure instead.

FICO's new analytical tool, which combines such factors as spending habits, changes in a person's debt and housing depreciation, is heralded as a way to ferret out borrowers making a business decision to walk away versus homeowners who truly can no longer afford their mortgage. FICO claims to be able to make this distinction before a borrower is even in default.

For banks, identifying strategic default borrowers early can help them make decisions on how to handle the delinquencies, including what kind of language to use during phone calls, and whether to pursue deficiency judgments.

A study released in March by the University of Chicago Booth School of Business found that 35 percent of mortgage defaults in September were strategic, compared with 26 percent in March 2009.

"It's critical for the mortgage servicer to understand the motivation, particularly while the borrower is still current on the loan, so they can take preventative action," said Joanne Gaskin, FICO's director of mortgage markets. "It's important to make sure the consumer understands the implications of walking away. They might not be aware of the continued liability."

A hit of 150 or more points to a person's credit score can be expected from foreclosure, FICO estimates. Also, in Florida, a lender has five years to file for a deficiency judgment and up to 20 years to collect.

A Palm Beach Post analysis of deficiency judgments showed only 133 claims were filed between April 2006 and November 2010 on foreclosed residential properties in Palm Beach County. But experts said more may be coming as banks work through the bulk of foreclosures or even sell the claims to debt collection companies.

Mark Stopa, a Tampa-based foreclosure defense attorney and proponent of strategic default, said financial institutions are just trying to scare homeowners, discouraging strategic defaults by convincing borrowers they are easily identifiable targets.

"Strategic default is a sound business decision for many people," Stopa said. "Bankers try to make it about morality, but they have to realize that there is an overwhelming incentive at this point for people to strategically default."

That's because home values have sunk so much from their boom-time prices. In Palm Beach County, the median price for an existing home in March was $186,500, down 52 percent from the March 2006 median price of $393,700, according to Florida Realtors reports.

Traditionally, banks have used only the degree of home price depreciation when determining whether a default is strategic. FICO said its new tool considers other characteristics and looks for someone with a good credit history and a low credit-card balance who has lived a short time in the home and has opened new credit in the past six months.

West Palm Beach resident Anthony Armenti, 59, fits some of those characteristics. He also has seen his home value plummet from his 2006 purchase price of $274,100 to a total market value today of $77,000.

Retired, Armenti can afford the payments, but he's also scrimping a little on other things and using coupons.

"I never had to live like that before," said Armenti, who has considered a strategic default. "I don't really need a credit score anymore. It would mean $1,600 in my pocket every month."

But Armenti said he won't walk away.

"I won't do it because it's not the right thing to do for the United States," he said.

But banks are preparing for people who don't share Armenti's sentiment.

Gaskin said loan servicers are grooming teams of employees on how to deal with strategic defaulters.

"Specialists should be trained to engage in a pragmatic, rational discussion that corresponds to and joins with the thinking process in which these customers are already engaged," said a FICO report about its new product. "They can help work through the alternatives and trade-offs to make a decision that potential strategic defaulters regard as less of a moral nature than a purely financial one."

The result of more strategic defaults is a continued decrease in home values, Gaskin said.

Howard Dolginoff, a member of the homeowners association board for the Grand Isles community in Wellington, has a stake in home values stabilizing. He knows of 18 homes in foreclosure in his neighborhood.

Selling for more than $500,000 in 2005, some homes are now valued at less than $300,000. Dolginoff said he understands why someone would strategically default.

"I try not to be too judgmental about this stuff," said Dolginoff, who bought in 2000. "I wouldn't do it. I wouldn't recommend it. I don't know if it's a moral thing or just personal pride."

The credit rating bureaus, whose reports influence everything from credit cards to mortgages to job offers, have a two-tiered system for resolving errors — one for the rich, the well-connected, the well-known and the powerful, and the other for everyone else.

The three major agencies, Equifax, Experian and TransUnion, keep a V.I.P. list of sorts, according to consumer lawyers and legal documents, consisting of celebrities, politicians, judges and other influential people. Those on the list — and they may not even realize they are on it — get special help from workers in the United States in fixing mistakes on their credit reports. Any errors are usually corrected immediately, one lawyer said.

For everyone else, disputes are herded into a largely automated system. Their complaints are often electronically ferried to a subcontractor overseas, where a worker spends, on average, about two minutes figuring out the gist of the matter, boiling it down to a one-to-three-digit computer code that signifies the problem — “account not his/hers,” for example — and sending a dispute form to the creditor to investigate. Many times, consumer advocates say, the investigation translates to a perfunctory check of its records.

“The legal responsibility of the credit reporting agencies and of the creditors is well established,” said Leonard Bennett, a consumer lawyer in Newport News, Va. “There is a requirement that they do meaningful research and analysis, and it is almost never done.”

Consumers who have trouble fixing errors through the dispute process can quickly find themselves trapped in a Kafkaesque no man’s land, where the only escape is through the court system.

“You are guilty before you are proven innocent in a situation like this,” said Catherine Taylor, 45, of Benton, Ark., who said she had been denied employment and credit because her filing was mixed up with a felon who had the same name and birthday.

Judy Johnson of Bossier City, La., was confused with a less creditworthy Judith Johnson, with a similar address and Social Security number. For nearly seven years, Judy Johnson, a 63-year-old credit manager for a building supply company, said she tried to remove the black marks from her credit report. But when she was denied a credit card, she knew the problem had returned — a third time. “This time, I was livid,” she said.

She ultimately brought a suit against one of the bureaus, and recently settled for an amount she cannot disclose. But the problems still linger. A deputy sheriff recently came to her door to serve her papers for a debt she says she does not owe.

The credit rating bureaus, private-sector companies that each attempt to track all American consumers’ credit use, have grown much more powerful over the last couple of decades as credit has become a crucial cog in the nation’s financial system. Their reports are used to formulate the all-powerful credit score, which lenders use to determine creditworthiness.

But as the bureaus’ work has become more important, consumer advocates say, regulation has not kept up, in large part because their overseer, the Federal Trade Commission, lacks broad authority. That could change once responsibility for the credit bureaus shifts to the new Consumer Financial Protection Bureau, which will be able to write rules and examine the credit agencies’ policies.

The bureaus, meanwhile, do not have an economic incentive to improve the system, consumer advocates say, because their main customers are the creditors, not consumers.

“There is no neutrality in the credit reporting agencies,” said John Ulzheimer, who has been an expert witness in more than 80 credit-related cases and is president of consumer education at SmartCredit.com. “They work for the lenders who buy credit reports from them, and anyone who suggests otherwise is not being intellectually honest.”

When asked about the V.I.P. category, TransUnion said all consumers “have the ability to speak to a live representative.” Equifax said consumers who received a free copy of their credit report were provided with a number for customer service.

Experian denied that it had V.I.P. lists. But a spokeswoman did say that prominent people deemed high risk — like politicians in an election year — might have their credit files taken offline so that creditors or other companies making inquiries could not get access without the bureau’s permission. Experian said those people did not receive any other special handling.

David Szwak, a consumer lawyer in Shreveport, La., who has handled dozens of credit cases, said that the V.I.P. designation and preferential treatment did exist at Experian, and he provided sworn testimony from former Experian employees that the category existed.

Estimates of credit reports with serious errors vary widely, anywhere from 3 to 25 percent. A recent study, paid for by the Consumer Data Industry Association, the trade group for the bureaus, found potential errors in 19.2 percent of reports, but said that less than 1 percent of them had disputes that, when settled, resulted in a meaningful increase in scores. Even 1 percent translates into millions of consumers, since there are at least 200 million files at each of the bureaus.

The F.T.C. is expected to deliver a nationwide study on credit report accuracy next year that could provide more clarity. It could also include recommendations for legislative action.

The volume of disputes has been rising as consumers borrow more and gain greater access to credit reports. The automated system was a response to that. A spokesman for the trade group said most consumers received an answer within 14 days.

Experian is the only bureau that still processes disputes in the United States, experts said, though most complaints wind their way through the same online system — unless the dispute involves a V.I.P.

“They get a lot more high-end treatment,” said Mr. Szwak, the lawyer, who has read the bureaus’ internal procedure manuals and deposed or cross-examined employees. The biggest difference at TransUnion and Equifax, lawyers said, is that V.I.P.’s disputes are specially handled domestically. Regular consumers’ files, meanwhile, may get priority treatment if they involve a time-sensitive issue, like a mortgage pending, or if the consumer is represented by a lawyer or dealing with fraud.

Last year, new rules went into effect to strengthen existing regulations on the accuracy of reports. The rules also allow consumers to dispute errors directly with the creditor. But critics say the rule lacks any teeth because consumers don’t have the right to sue the companies. (Individuals can, however, sue the bureaus and creditors after lodging a dispute through their system.)

But the problem, advocates say, is that consumers cannot vote with their feet. “They cannot remove their information from the bureaus,” said Chi Chi Wu, a staff lawyer at the National Consumer Law Center, who wrote a report on the automated dispute process in 2009, “or take their business elsewhere.”

The burden of paying for college is wreaking havoc on the finances of an unexpected demographic: senior citizens.

New research from the Federal Reserve Bank of New York shows that Americans 60 and older still owe about $36 billion in student loans, providing a rare window into the dynamics of student debt. More than 10 percent of those loans are delinquent. As a result, consumer advocates say, it is not uncommon for Social Security checks to be garnished or for debt collectors to harass borrowers in their 80s over student loans that are decades old.

That even seniors remain saddled with student loans highlights what a growing chorus of lawmakers, economists and financial experts say has become a central conflict in the nation’s higher education system: The long-touted benefits of a college degree are being diluted by rising tuition rates and the longevity of debt.

Some of these older Americans are still grappling with their first wave of student loans, while others took on new debt when they returned to school later in life in hopes of becoming more competitive in the labor force. Many have co-signed for loans with their children or grandchildren to help them afford ballooning tuition.

The recent recession exacerbated this problem, making it harder for older Americans — or the youths they are supporting in school — to get good-paying jobs. And unlike other debts, student loans cannot be shed in bankruptcy. As a result, some older Americans have found that a college degree led not to a prosperous career but instead to a lifetime under the shadow of debt.

“A student loan can be a debt that’s kind of like a ball and chain that you can drag to the grave,” said William E. Brewer, president of the National Association of Consumer Bankruptcy Attorneys. “You can unhook it when they lay you in the coffin.”

Sandy Barnett, 58, of Illinois thought she was doing the right thing when she decided to pursue a master’s degree in clinical psychology in the late 1980s. She had worked her way through college but said she took out a loan of about $21,000 to pay for graduate school so she would have more time to focus on her studies.

But even after earning her master’s, Barnett struggled to find a job that paid more than $25,000 a year and soon fell behind on her payments. She suffered through a layoff, a stretch of unemployment and the death of her husband — while her student loan ballooned to roughly $54,000.

Barnett filed for bankruptcy in 2005, but she couldn’t get out from under her student loan debt. She said a collection agency began garnishing the wages from her full-time job as a customer service representative a year ago, and now money is so tight that she must choose between buying gas and buying food. An air conditioner for her mobile home is an unimaginable luxury.

“I shake my head every day at the thought that I’m working for nothing,” Barnett said. “It’s really a black hole because there’s no end in sight.”

A college degree has traditionally been viewed as a virtual guarantee of a better-paying job and a higher standard of living. And on the whole, that remains true. The unemployment rate for Americans with only a high school education is 9.2 percent — more than double the rate for those with college degrees. The median weekly earnings for high school graduates last year was $638, according to government data, compared with $1,053 for college grads.

But with the recent recession prompting layoffs at white-collar law firms and investment banks as well as auto plants and construction companies, more Americans are finding themselves out of work and deep in debt. At a Senate subcommittee hearing last week, Treasury Secretary Timothy F. Geithner said the cost of higher learning should reflect the quality of education received.

Many students “haven’t been able to earn a return that justifies the expense,” he said.

Over the past decade, the cost of college rose between 2 and 6 percent per year, depending on the type of institution, according to the College Board.

Meanwhile, the New York Fed estimates that Americans owed $870 billion in student loans during the third quarter of last year, significantly outpacing credit card debt or auto loans. Borrowers age 60 and above accounted for 5percent of that debt. The share for Americans age 50 and older is 17 percent.

In some cases, student debt has been a burden for even financially responsible older Americans.

Maxine Bass, 60, of Minnesota said her granddaughter dreamed of going to college since she was a child. But her mother could barely afford to provide her lunch money, much less pay for tuition. Bass had good credit and a steady job.

So when her granddaughter was accepted into St. Catherine University to study biology, Bass said she gladly co-signed for a $38,000 loan with her. But when the granddaughter fell behind on the payments as she hunted for a job with a decent salary, Bass’s own finances took a hit.

“I went into a panic, like, what was I gonna do?” Bass wondered.

Because of late fees and missed payments, Bass said she and her granddaughter owe about $69,000. They are now contributing monthly, but Bass is worried she won’t be able to catch up.

“Many parents who thought they were headed to retirement with a college-educated child end up continuing to work because of student debt that can’t be paid,” Sen. Richard J. Durbin (D-Ill.) said at last week’s hearing.

Durbin has introduced legislation that would allow private student loan debt to be discharged in bankruptcy, though borrowers would still have to pay off any federal loans. Sallie Mae, one of the nation’s largest private student lenders, as well as consumer groups support all types of student loans being forgiven during bankruptcy. Last year, President Obama addressed the issue by easing the repayment requirements for federal student loans. The new rules allow borrowers to pay 10 percent of their income for 20 years before the loan is forgiven.

Still, the bill would only address one aspect of what many believe is a more fundamental problem: the cost of college. Until that is solved, Suzanne Martin, an attorney with Consumers Union, said she anticipates older Americans’ share of student loans will only increase.

“This current generation of borrowers is going to be a generation of seniors who are burdened with debt,” she said.

NEW YORK -- Like most medical students, Michael Gott has a lot of student debt. Unlike most medical students, his family possesses the baseball that Yankees slugger Lou Gehrig hit for a home run during the 1928 World Series. Not for long, though, because Gott's mother is selling the ball to help pay off her son's loans.

By early Friday, bidding for the famous ball had reached more than $33,000, but Hunt Auctions of Exton, Penn., which is handling the sale, expects to fetch $100,000 to $200,000 for the ball, which flew into the bleachers on Oct. 5, 1928, in the second game of the series.

"It should be in the hands of someone who really loves it and has a passion for it," Gott's mother, Elizabeth Gott, told the Associated Press. "Right now we have a passion for my son and his career."

According to a description of the ball on the Hunt Auctions website, the ball is extraordinarily valuable for a number of reasons: It has been in the hands of the same family for 84 years. It comes with accompanying newspaper articles detailing the famous hit and the manner in which the ball fell into the hands of a young man named Buddy Kurland, who was Elizabeth Gott's great-uncle. And it involved some of baseball's most legendary players.

Babe Ruth was among the Yankee teammates on base when Gehrig hit the three-run homer, helping the Yankees to a 9-3 victory over St. Louis. New York went on to win the series, but Gehrig's career was cut short when he was diagnosed with amyotrophic lateral sclerosis, the disease that killed him in 1941 and that is now referred to commonly as Lou Gehrig's disease.

For years, the baseball sat on display in the window of Buddy Kurland's shop in South Manchester, Conn., but eventually it ended up in a drawer in Elizabeth Gott's Stamford, Conn., home. With her 30-year-old son's medical school loans nearing $200,000, she said, it seemed like the right time to sell the ball.

While valuable, the ball isn't nearly as pricey as some other bits of baseball history. According to Hunt, its sales in recent years have included a 1933 All-Star Game inaugural home run baseball that sold for $805,000, as well as Babe Ruth's 702nd home run ball from 1934, which fetched $264,500 at auction.

“I think what we enjoy about handling pieces like this is they really … bear the significance of baseball within American culture in the last 100-plus years,” Hunt president David Hunt told the AP. "Unlike any other sport, baseball has that just unbelievably storied history.”

The nation's dominant credit-scoring system is being revised in a way that could save consumers nationwide billions of dollars, especially in qualifying for mortgages, auto loans and credit cards at lower interest rates.

The changes to FICO criteria are aimed at reducing the negative effect of overdue medical bills and at removing the penalties to consumers who pay off debts that had been assigned to collection agencies.

The revisions, to take effect this fall, will alter the formulas used to generate the credit grades used in more than 90% of the decisions that lenders make about how much consumers can borrow and at what interest rates. The scores also are used by employers and landlords.

Improved scores could make it easier for millions of Americans with past credit blemishes to get loans or to get them at lower rates.

Experts cautioned, though, that borrowers might have to wait a year or more to see the effect of changes because lenders will not quickly overhaul their systems to evaluate consumers and price loans for them.

What's more, the effect on the housing market, a major key to economic growth, is likely to be muted. Analysts said change would be seen more rapidly in auto loans and credit cards than in mortgages.

"These are not changes that are going to turn on a fire hose of new loan applications any time soon," said Greg McBride, the chief analyst at consumer financial website Bankrate.com. "For a lot of people, it's not so much going to be the difference between being approved and denied as it is the terms on which you are approved."

For consumers whose only major delinquency is an unpaid medical bill, the changes would increase a credit score by 25 points, according to Fair Isaac Corp., the company that provides FICO scores to the three big credit-rating firms. Scores range from 300 to 850, and most lenders prefer a score above 700.

The revisions, released Thursday, address a major point of contention between Fair Isaac and consumer groups.

Consumer advocates had complained that medical patients frequently are left in the dark when insurers reject payment on a bill, which can then go to collection. What's more, unexpected medical catastrophes can swamp otherwise responsible borrowers with enormous bills.

A recent Consumer Financial Protection Bureau study, based on data from Fair Isaac and the credit bureaus, found that both paid and unpaid medical debts unfairly penalized a consumer's credit rating.

Although the changes will affect FICO scores, they won't remove any unpaid debts from a credit report.

Lenders could still use the items as a reason to deny a loan application or charge more in fees or interest.

Credit unions will need time to study the new FICO criteria but are likely to adopt them quickly, said Arnold Ramirez, a consultant for the California and Nevada Credit Union Leagues. He said a consumer who pays off a debt that went to collection years ago would be regarded favorably.

"Credit unions were created to help people of modest means," Ramirez said. "We want to help people who may have had problems but are now putting themselves back in good financial standing."

Many mortgage lenders use a previous version of FICO, which also is still favored by industry financing giants Fannie Mae and Freddie Mac. Together they buy or guarantee more than 60% of home loans.

A credit score is just one of many factors a lender looks at when considering a loan.

A survey by FICO of bank risk managers last month found that they were nearly six times more likely to reject a loan application because of a high debt-to-income ratio — the amount of a borrower's income devoted to housing and debt payments — than because of a low FICO score.

"The credit score plays less of a role [in a mortgage decision] than most people think," said Kelli Isaacs, vice president and regional sales manager for Southern California at Bank of the West. "I think what people should be looking at is the overall picture. Regardless of your scores, are you paying your bills?"

Meanwhile, lenders have eased up on the credit scores they have been requiring in the aftermath of the mortgage meltdown and financial crisis. The average FICO score for a closed mortgage in June was 728, down from 742 a year earlier, according to Ellie Mae, a company that processes mortgage applications for lenders.

Still, a higher score often translates into lower interest rates and lower payments.

A borrower with a FICO score of 675 can expect to pay 4.75% interest on a 30-year fixed-rate mortgage, according to Informa Research Services in Calabasas. That amounts to $2,086 a month in principal and interest on a $400,000 loan.

At a FICO score of 700, that rate drops to 4.212%, and the monthly payment falls $127, to $1,959.

Access to credit is still a big hurdle for the housing market. A survey this week by the Federal Reserve found that 29% of renters hadn't bought a house because they couldn't qualify for a mortgage.

Anything that makes qualifying easier and cheaper should be welcome news, said Lawrence Yun, chief economist for the National Assn. of Realtors.

"In recent years the [credit score requirement] has been dialed so tightly that only fairly upper-tier consumers were able to qualify for a loan," he said. "We're looking at people, who are currently being denied, potentially being offered a mortgage because of this."

Nick Clements, a credit-scoring expert who heads Magnify Money, a personal finance site, said the changes have the potential to save consumers billions of dollars, noting that 64 million Americans have a medical collection item on their credit reports.

But Clements said banks probably will take a year to 18 months to analyze the effects of the new scoring on their loans and set up new pricing strategies. And improvement won't be automatic.

"Just because FICO says that someone is low risk does not mean a bank will treat them as such," Clements said.

There are times when you’re right but you wish you weren’t. This is one of those times.

Ten years ago, a reader wrote to me asking for advice about his relationship with his girlfriend. It was near Valentine’s Day, and he wanted to ask her to marry him. But he had major reservations about how she managed her money.

“I plan to propose to my girlfriend of a year and a half,” he wrote at the time. “Her spending habits are outrageous. She justifies [the spending] by saying she works two jobs and bargain-shops. She has more than 400 pairs of shoes, some she’s not even worn, and clothing falls in the same category. There is almost no room left in her home. I am the frugal one in the relationship, and I hope it’s beginning to sink in that she can’t spend the way she’s done in the past.”

He asked for my help. “What can I do to help her curb her spending habits without making her feel bad or as though I am putting her down?”

I told him to hold off on the engagement. He had a lot of work to do before hitching his life to someone he was concerned had financial issues, and in particular to a partner not willing to acknowledge she might have a spending problem.

“Realize the two of you are a classic case of money opposites attracting,” I answered. “This isn’t unusual. But having different spending styles that aren’t worked out can cause serious conflicts in a marriage. The important thing is to exchange your views about money before you exchange wedding vows.”

I laid out several specific things he needed to do before proposing. I recommended that the couple discuss their expectations. He should express his concerns. But I cautioned that the conversation shouldn’t be just about her spending. Otherwise, things might get confrontational. She might become defensive. And frugality isn’t always good if the penny-pincher is too critical or judgmental of a spouse’s different money style.

I suggested that they pull their credit reports and share them with each other. Same for their credit scores. You can get free copies of your credit reports every 12 months from annualcreditreport.com. You have to pay for the credit scores, but it’s worth the money to check each other’s creditworthiness.

I suggested that they seek professional help from a credit counselor who could provide information about budgeting and money management. I even gave him the contact information to find a counselor — debtadvice.org or call 800-388-2227. It’s still the same site and number, should you be in a similar situation.

I ended with this warning: “You’re right to be concerned. It’s vital that you address your financial differences before you get married. After all, love does not conquer all, because it can’t pay the bills.”

Fast-forward to this month, and I get another e-mail from the same guy. He didn’t do any of the things I suggested.

“Your column that February 8th was spot on and, although I read it, I didn’t follow it,” he wrote. “Thus here I am on the brink of financial ruin and a failed marriage.”

Sometime after the wedding, he discovered that his wife owed $30,000 to the Internal Revenue Service. “While I already had one mortgage, I took out a second in order to pay off her tax debt. Had I asked all the pertinent questions early on, I would have also discovered [another] $15,000 tax bill from the city.”

Earlier this year, just in time for Valentine’s Day, the National Endowment for Financial Education released a survey that found that 13 percent of couples who have combined finances have deceived their partners by lying about such things as the amount of debt they owe or how much they earn.

Things have not gone well in the e-mail writer’s relationship in part because of the lack of financial disclosure.

“Here we are 10 years later,” he wrote. “The home I purchased, I now stand a good chance of losing by not asking all the right questions. I’ve put my financial health in a dismal, near-death state. This is not a good feeling, as I now also have a young child at home. Hopefully, I will be able to save my home to the point where it can just be sold and I can begin to stop the bloodletting of my financial woes, and prepare for my retirement (53 years old) and her schooling.”

It may not be too late to get help and save his marriage.

Nonetheless, the reader wanted to warn others. He ended his update with this: “It’s my hope that others don’t fall into the same mishap I’ve put myself into.”

Miss a Payment? Good Luck Moving That CarBy Michael Corkery and Jessica Silver-Greenberg

The thermometer showed a 103.5-degree fever, and her 10-year-old’s asthma was flaring up. Mary Bolender, who lives in Las Vegas, needed to get her daughter to an emergency room, but her 2005 Chrysler van would not start.

The cause was not a mechanical problem — it was her lender.

Ms. Bolender was three days behind on her monthly car payment. Her lender, C.A.G. Acceptance of Mesa, Ariz., remotely activated a device in her car’s dashboard that prevented her car from starting. Before she could get back on the road, she had to pay more than $389, money she did not have that morning in March.

“I felt absolutely helpless,” said Ms. Bolender, a single mother who stopped working to care for her daughter. It was not the only time this happened: Her car was shut down that March, once in April and again in June.

This new technology is bringing auto loans — and Wall Street’s version of Big Brother — into the lives of people with credit scores battered by the financial downturn.

Auto loans to borrowers considered subprime, those with credit scores at or below 640, have spiked in the last five years. The jump has been driven in large part by the demand among investors for securities backed by the loans, which offer high returns at a time of low interest rates. Roughly 25 percent of all new auto loans made last year were subprime, and the volume of subprime auto loans reached more than $145 billion in the first three months of this year.

But before they can drive off the lot, many subprime borrowers like Ms. Bolender must have their car outfitted with a so-called starter interrupt device, which allows lenders to remotely disable the ignition. Using the GPS technology on the devices, the lenders can also track the cars’ location and movements.

The devices, which have been installed in about two million vehicles, are helping feed the subprime boom by enabling more high-risk borrowers to get loans. But there is a big catch. By simply clicking a mouse or tapping a smartphone, lenders retain the ultimate control. Borrowers must stay current with their payments, or lose access to their vehicle.

“I have disabled a car while I was shopping at Walmart,” said Lionel M. Vead Jr., the head of collections at First Castle Federal Credit Union in Covington, La. Roughly 30 percent of customers with an auto loan at the credit union have starter interrupt devices.

Now used in about one-quarter of subprime auto loans nationwide, the devices are reshaping the dynamics of auto lending by making timely payments as vital to driving a car as gasoline.

Seizing on such technological advances, lenders are reaching deeper and deeper into the ranks of Americans on the financial margins, with interest rates on some of the loans exceeding 29 percent. Concerns raised by regulators and some rating firms about loose lending standards have disturbing echoes of the subprime-mortgage crisis.

As the ignition devices proliferate, so have complaints from troubled borrowers, many of whom are finding that credit comes at a steep price to their privacy and, at times, their dignity, according to interviews with state and federal regulators, borrowers and consumer lawyers.

Some borrowers say their cars were disabled when they were only a few days behind on their payments, leaving them stranded in dangerous neighborhoods. Others said their cars were shut down while idling at stoplights. Some described how they could not take their children to school or to doctor’s appointments. One woman in Nevada said her car was shut down while she was driving on the freeway.

Beyond the ability to disable a vehicle, the devices have tracking capabilities that allow lenders and others to know the movements of borrowers, a major concern for privacy advocates. And the warnings the devices emit — beeps that become more persistent as the due date for the loan payment approaches — are seen by some borrowers as more degrading than helpful.

“No middle-class person would ever be hounded for being a day late,” said Robert Swearingen, a lawyer with Legal Services of Eastern Missouri, in St. Louis. “But for poor people, there is a debt collector right there in the car with them.”

Lenders and manufacturers of the technology say borrowers consent to having these devices installed in their cars. And without them, they say, millions of Americans might not qualify for a car loan at all.

From his office outside New Orleans, Mr. Vead can monitor the movements of about 880 subprime borrowers on a computerized map that shows the location of their cars with a red marker. Mr. Vead can spot drivers who have fallen behind on their payments and remotely disable their vehicles on his computer or mobile phone.

The devices are reshaping how people like Mr. Vead collect on debts. He can quickly locate the collateral without relying on a repo man to hunt down delinquent borrowers.

Gone are the days when Mr. Vead, a debt collector for nearly 20 years, had to hire someone to scour neighborhoods for cars belonging to delinquent borrowers. Sometimes locating one could take years. Now, within minutes of a car’s ignition being disabled, Mr. Vead said, the borrower calls him offering to pay.

“It gets their attention,” he said.

Mr. Vead, who has a coffee cup that reads “The GPS Man,” has been encouraging other credit unions to use the technology. And the devices — one version was first used to help pet owners keep track of their animals — are catching on with a range of subprime auto lenders, including companies backed by private equity firms and credit unions.

Mr. Vead says that first, he tries reaching a delinquent borrower on the phone or in person. Then, only after at least 30 days of missed payments, he typically shuts down cars when they are parked at the borrower’s house or workplace. If there is an emergency, he says, he will turn a car back on.

None of the borrowers or consumer lawyers interviewed by The New York Times raised concerns about the way Mr. Vead’s credit union uses the devices. But other lenders, they said, were not as considerate, marooning drivers in far-flung places and often giving no advance notice of a shut-off. Lenders say that they exercise caution when disabling vehicles and that the devices enable them to extend more credit.

Without the use of such devices, said John Pena, general manager of C.A.G. Acceptance, “we would be unable to extend loans because of the high-risk nature of the loans.”

The growth in the subprime market has been good for the devices’ manufacturers. At Lender Systems of Temecula, Calif., which sells a range of starter interrupt devices, revenue has more than doubled so far this year, buoyed by an influx of new credit union customers, said David Sailors, the company’s executive vice president.

Mr. Sailors noted that GPS tracking on his company’s devices could be turned on only when borrowers were in default — a policy, he said, that has cost it business.

The devices, manufacturers say, are selling well because they are proving effective in coaxing payments from even the most troubled borrowers.

A leading device maker, PassTime of Littleton, Colo., says its technology has reduced late payments to roughly 7 percent from nearly 29 percent. Spireon, which offers a GPS device called the Talon, has a tool on its website where lenders can calculate their return on capital.

While the devices make life easier for lenders, their ability to track drivers’ movements has struck a nerve with a number of borrowers and some government authorities, who say they are a particularly troubling example of personal-data gathering and surveillance.

At its extreme, consumer lawyers say, such surveillance can compromise borrowers’ safety. In Austin, Tex., a large subprime lender used a device to track down and repossess the car of a woman who had fled to a shelter to escape her abusive husband, said her lawyer, Amy Clark Kleinpeter.

The move to the shelter violated a clause in her auto loan contract that restricted her from driving outside a four-county radius, and that prompted the lender to send a tow truck to take back the vehicle. If the lender could so easily locate the client, Ms. Kleinpeter said, what was stopping her husband?

“She was terrified her husband would be able to find out where she was from the tow truck company,” said Ms. Kleinpeter, a consumer lawyer in Austin, who said a growing number of her clients had the devices installed in their cars.

Lenders and manufacturers emphasize that they have strict guidelines in place to protect drivers’ information. The GPS devices, they say, are predominantly intended to help lenders and car dealerships locate a car if they need to repossess it, not to put borrowers under surveillance.

Spireon says it can help lenders identify signs of trouble by analyzing data on a borrower’s behavior. Lenders using Spireon’s software can create “geo-fences” that alert them if borrowers are no longer traveling to their regular place of employment — a development that could affect a person’s ability to repay the loan.

A Spireon spokeswoman said the company takes privacy seriously and works to ensure that it complies with all state regulations.

Corinne Kirkendall, vice president for compliance and public relations for PassTime, which has sold 1.5 million devices worldwide, says the company also calls lenders “if we see an excessive use” of the tracking device.

Even though the device made her squeamish, Michelle Fahy of Jacksonville, Fla., agreed to have one installed in her 2001 Dodge Ram because she needed the pickup truck for her job delivering pizza.

Shortly after picking up her four children from school one afternoon in January, Ms. Fahy, 42, said she pulled into a gas station to fill up. But when she tried to restart the truck, she was not able to do so.

Then she looked at her cellphone and noticed a string of missed calls from her lender. She called back and asked, “Did you just shut down my truck?” and the response was “Yes, I did.”

To get her truck restarted, Ms. Fahy had to agree to pay the $255.99 she owed. As she pleaded for more time, her children grew confused and worried. “They were in panic mode,” she said. Finally, she said she would pay, and within minutes she was able to start her engine.

Borrowers are typically provided with codes that are supposed to restart the vehicle for 24 hours in case of an emergency. But some drivers say the codes fail. Others say they are given only one code a month, even though their cars are shut down more often.

Some drivers take matters into their own hands. Homemade videos on the Internet teach borrowers how to disable their devices, and Spireon has started selling lenders a fake GPS device called the Decoy, which is meant to trick borrowers into thinking they have removed the actual tracking system, which is installed along with the Decoy.

Oscar Fabela Jr., who said his 2007 Dodge Magnum was routinely shut down even when he was current on his $362 monthly car payment, discovered a way to circumvent the system.

That trick came in handy when he returned from seeing a movie with a date, only to find his car would not start and the payment reminder was screaming like a burglar alarm.

“It sounded like I was breaking into my own car,” said Mr. Fabela, 26, who works at a phone company in San Antonio.

While his date turned the ignition switch, Mr. Fabela used a screwdriver to rig the starter, allowing him to bypass the starter interruption device.

Mr. Fabela’s car eventually started, but it was their only date.

“It didn’t end well,” he said.

Across the country, state and federal authorities are grappling with how to regulate the new technology.

Consumer lawyers, including dozens whose clients’ cars have been shut down, argue that the devices amount to “electronic repossession” and their use should be governed by state laws, which outline how much time borrowers have before their cars can be seized.

State laws governing repossession typically prevent lenders from seizing cars until the borrowers are in default, which often means that they have not made their payments for at least 30 days.

The devices, lawyers for borrowers argue, violate those laws because they may effectively repossess the car only days after a missed payment. Payment records show that Ms. Bolender, the Las Vegas mother with the sick daughter, was not in default in any of the four instances her ignition was disabled this year.

PassTime and the other manufacturers say they ensure that their devices comply with state laws. C.A.G. declined to comment on Ms. Bolender’s experiences.

State regulators are also examining whether a defective device could endanger the borrowers or other drivers on the road, according to people with knowledge of the matter who spoke on the condition of anonymity.

Last year, Nevada’s Legislature heard testimony from T. Candice Smith, 31, who said she thought she was going to die when her car suddenly shut down, sending her careening across a three-lane Las Vegas highway.

“It was horrifying,” she recalled.

Ms. Smith said that her lender, C.A.G. Acceptance, had remotely activated her ignition interruption device.

“It’s a safety hazard for the driver and for all others on the road,” said her lawyer, Sophia A. Medina, with the Legal Aid Center of Southern Nevada.

Mr. Pena of C.A.G. Acceptance said, “It is impossible to cause a vehicle to shut off while it is operating,” He added, “We take extra precautions to try and work with and be professional with our customers.” While PassTime, the device’s maker, declined to comment on Ms. Smith’s case, the company emphasized that its products were designed to prevent a car from starting, not to shut it down while it was in operation.

“PassTime has no recognition of our devices shutting off a customer while driving,” Ms. Kirkendall of PassTime said.

In her testimony, Ms. Smith, who reached a confidential settlement with C.A.G., said the device made her feel helpless.

“I felt like even though I made my payments and was never late under my contract, these people could do whatever they wanted,” she testified, “and there was nothing I could do to stop them.”

NEW YORK -- Like most medical students, Michael Gott has a lot of student debt. Unlike most medical students, his family possesses the baseball that Yankees slugger Lou Gehrig hit for a home run during the 1928 World Series. Not for long, though, because Gott's mother is selling the ball to help pay off her son's loans.

By early Friday, bidding for the famous ball had reached more than $33,000, but Hunt Auctions of Exton, Penn., which is handling the sale, expects to fetch $100,000 to $200,000 for the ball, which flew into the bleachers on Oct. 5, 1928, in the second game of the series.

"It should be in the hands of someone who really loves it and has a passion for it," Gott's mother, Elizabeth Gott, told the Associated Press. "Right now we have a passion for my son and his career."

According to a description of the ball on the Hunt Auctions website, the ball is extraordinarily valuable for a number of reasons: It has been in the hands of the same family for 84 years. It comes with accompanying newspaper articles detailing the famous hit and the manner in which the ball fell into the hands of a young man named Buddy Kurland, who was Elizabeth Gott's great-uncle. And it involved some of baseball's most legendary players.

Babe Ruth was among the Yankee teammates on base when Gehrig hit the three-run homer, helping the Yankees to a 9-3 victory over St. Louis. New York went on to win the series, but Gehrig's career was cut short when he was diagnosed with amyotrophic lateral sclerosis, the disease that killed him in 1941 and that is now referred to commonly as Lou Gehrig's disease.

For years, the baseball sat on display in the window of Buddy Kurland's shop in South Manchester, Conn., but eventually it ended up in a drawer in Elizabeth Gott's Stamford, Conn., home. With her 30-year-old son's medical school loans nearing $200,000, she said, it seemed like the right time to sell the ball.

While valuable, the ball isn't nearly as pricey as some other bits of baseball history. According to Hunt, its sales in recent years have included a 1933 All-Star Game inaugural home run baseball that sold for $805,000, as well as Babe Ruth's 702nd home run ball from 1934, which fetched $264,500 at auction.

“I think what we enjoy about handling pieces like this is they really … bear the significance of baseball within American culture in the last 100-plus years,” Hunt president David Hunt told the AP. "Unlike any other sport, baseball has that just unbelievably storied history.”

In another thread I accused PrimeMuscle of "not getting it." I confess this is one of those things that I just don't get: paying huge sums for ostensibly rare items that have no intrinsic value. I grew up reading comics and love them, but would I pay big money to own Action Comics #1 featuring Superman, even if I were very wealthy? No. Hyper expensive clothes or jewelry does not interest me in the slightest. More to the point, no salesperson or third party can make me believe a random or routine object is worth a hyper inflated price because it is rare, collectable, or old such that I would pay big money for it. Obviously, there is a marketplace and people for such things, but I am not among them.

Millions of Americans have lousy credit. Some lost their jobs in the 2008 financial crisis and survived on credit cards. Some left college buried in loans. Others live in minority neighborhoods that are preyed upon by unscrupulous lenders. Still others had the bad luck to be sick and uninsured. Does membership in the undiscriminating club of beleaguered borrowers inevitably make someone a risky hire or an unreliable employee? Hardly. Does it justify the increasingly common practice of employers using credit checks to reject prospective hires? No.

A bill banning employment discrimination based on someone’s credit history has been offered in the New York City Council by Brad Lander, who says the misuse of credit reports in hiring is based on a damaging perception, disproved by research, that bad credit risks make bad employees. He points to studies that show no correlation between damaged credit and job performance or the likelihood of committing fraud. Mr. Lander is not the first lawmaker to reach this conclusion; similar legislation has passed in at least 10 states and was introduced in Congress by Senator Elizabeth Warren of Massachusetts.

The City Council bill has wide support, but Mr. Lander fears it may be weakened by the addition of exceptions and loopholes for certain industries or occupations, as has been done in some states. That would undermine its ability to combat this form of discrimination. The worst of the recession is behind us, but the damage lives on for millions of Americans who are hobbled by bad credit. The injury is made worse when companies rely on stereotypes and misinformation to exclude deserving workers from the job market.

New York could be a leader in reversing this unsavory trend; the Council and Mayor Bill de Blasio should unite behind this worthwhile bill.